Is blockholder dispersion attracting foreign investors?

Abstract

This paper examines the impact of blockholder dispersion on the foreign ownership in the Korean stock market over the period 2005-2016. We use the Herfindahl Index as a substitute variable for blockholder dispersion. Results show that a lower Herfindahl Index leads to a higher foreign ownership of the publicly listed companies in Korea. This implies that foreign investors prefer companies with dispersed ownership. We confirmed that foreign investors also preferred firms with low volatility, small dividend yields, large, low leverage, and high accounting performance. We have also found that the behavior of foreign investors is different before and after global financial risk. Our findings contribute to our understanding regarding to the relation between foreign investors and ownership dispersion in Korean stock markets.